We will wait for 4G to evolve in the country, says Idea Cellular MD

Idea Cellular, the country’s third largest telecom operator by users and revenue, is still bullish on voice telephony and continues to invest in its GSM operations. With many subscribers holding multi-SIMs, the company sees an opportunity as the total number of Indian mobile users will not be more than 500-550 million.

The GSM operator is readying to launch 3G services in two more circles – Punjab and Delhi – increasing its footprint to 12, while mobile number portability (MNP) would be a critical component for growth. In a tête-à-tête with Business Line , Idea Cellular Managing Director Himanshu Kapania says that the operator has the financials and sufficient headroom to fund licences renewal, with seven circles coming up for renewal in December 2015 and two circles by March 2016. Excerpts:

In March, Idea Cellular topped GSM user addition charts. Where are these new users coming in from and going forward do you expect to maintain this growth?

Idea Cellular has a large proportion of rural subscribers in its total subscriber base, while the third and fourth quarters of the fiscal were seasonal ones for the rural segment. We saw those benefits coming in. We remain bullish on voice telephony and that is the reason why we continue to invest in GSM. There is still a growth opportunity available in voice, with the total Visitor Location Registry (VLR) numbers being at about 780 million as of February. Removing multi-SIM users, our assessment is that Indian mobile users will not be more than 500-550 million. That’s the opportunity we see.

In your opinion, has the intensity of competition in industry come down? Is this due to consolidation?

Yes, the intensity of competition has fallen. Post November 2012 auction, the number of operators has fallen to 11 from 16. Of which, only two or three are currently generating sufficient free cash flows after interest cost and capex. This is not sustainable and in the long run industry has to find a way through consolidation. These operators are also holding on to large quantum of spectrum, which is not being well-utilised.

For Idea Cellular, last year (FY14) has been splendid one. How do you see FY15 shaping up?

Last year, we had a VLR growth of 18 million against 14 million earlier, while we invested in more than 14,800 GSM sites and 4,000 3G sites. We will expand our 3G footprint from present 10 circles to 12. We see all these yielding results in FY15.

By when will your 3G footprint rise to 12 circles?

We will launch the additional circles in FY15, covering 80 per cent of our revenues. We had procured spectrum in Punjab in 2010 and now that we got Department of Telecommunications’ authorisation, it’s just a matter of time. Delhi is the other circle, with the scheduled 3G spectrum allocation in November 2014. We will launch Delhi within four-six months of allocation.

Idea Cellular’s capex (other than spectrum) for FY15 is much in line with that of the previous years. Why hasn’t there been much of an increase over the years?

In FY13, we spent ₹3,200 crore and in FY14 we invested ₹,480 crore, and this year we are again investing ₹3,500 crore. We had made 16 per cent investment in GSM sites and we don’t need to make such large investment in FY15. We will invest primarily in 3G as we add two circles. From FY10, when we had negligible fibre, we have reached 81,000 km of fibre and we need to further strengthen it.

In the next three-four years as the volume of wireless broadband increase, we will make larger allocations. We also have to be careful as our licences are coming up for renewal.

You have been one of the biggest beneficiaries of MNP. Going forward, do you see Idea Cellular retaining this edge?

MNP remains a critical component of growth for us, and I am sure we will remain a top operator on the MNP front. It is the test of the quality of our services and test of the brand’s customer affinity.

We are happy that one out of four customers who decide to leave their existing operators joins Idea Cellular.

On your plans to provide 4G services?

As far as high-speed data network is concerned, the choices are 3G and then followed by 4G. The ecosystem for 3G is fast evolving and we remain focused to grow our 3G network. As far as 4G is concerned, we have mostly got 1800 MHz continuous spectrum in circles where we already have 3G services and once the capacity is fully utilised, then it would be right time to launch 4G hotspots. We will wait for 4G to evolve in the country.

Your plans to fund licence extensions?

As a company, we have both the financials and free cash flows. In last year, we generated ₹6,400 crore of free cash flows. We have sufficient headroom to raise additional debt and we have other opportunities available.

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